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How do they affect re-employment rates and flows
into states of inactivity for older unemployed workers?
Many OECD countries have, or have had, a policy
that exempts older unemployed people from the requirement to search for a
job. An aging population and low participation by older workers in the labor
market increasingly place public finances under strain, and spur calls for
policy measures that activate labor force participation by older workers.
Introducing job search requirements for the older unemployed aims to
increase their re-employment rates. Abolishing the exemption from job search
requirements for these workers has been shown to initiate higher outflow
rates from unemployment for the older unemployed.
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Jobs can change quickly from full- to part-time
status, especially during economic downturns
The share of workers employed part-time
increases substantially in economic downturns. How should this phenomenon be
interpreted? One hypothesis is that part-time jobs are more prevalent in
sectors that are less sensitive to the business cycle, so that recessionary
changes in the sectoral composition of employment explain the increase in
part-time employment. The evidence shows, however, that this hypothesis only
accounts for a small part of the story. Instead, the growth of part-time
work operates mainly through reductions in working hours in existing
jobs.
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Unemployment insurance can protect against
income loss and create formal employment
Unemployment insurance can be an efficient tool
to provide protection for workers against unemployment and foster formal job
creation in developing countries. How much workers value this protection and
to what extent it allows a more efficient job search are two key parameters
that determine its effectiveness. However, evidence shows that important
challenges remain in the introduction and expansion of unemployment
insurance in developing countries. These challenges range from achieving
coverage in countries with high informality, financing the scheme without
further distorting the labor market, and ensuring progressive
redistribution.
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Temporary government schemes can have a
positive economic effect
Government schemes that compensate workers for
the loss of income while they are on short hours (known as short-time work
compensation schemes) make it easier for employers to temporarily reduce
hours worked so that labor is better matched to output requirements. Because
the employers do not lay off these staff, the schemes help to maintain
permanent employment levels during recessions. However, they can create
inefficiency in the labor market, and might limit labor market access for
freelancers and those looking to work part-time.
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Time-limited benefits may yield significant
welfare gains and help underemployed part-time workers move to full-time
employment
A considerable share of the labor force consists
of underemployed part-time workers: employed workers who, for various
reasons, are unable to work as much as they would like to. Offering
unemployment benefits to part-time unemployed workers is controversial. On
the one hand, such benefits can strengthen incentives to take a part-time
job rather than remain fully unemployed, thus raising the probability of
obtaining at least some employment. On the other hand, these benefits weaken
incentives for part-time workers to look for full-time employment. It is
also difficult to distinguish people who work part-time by choice from those
who do so involuntarily.
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Selection and incentives in retirement plans
affect job transitions
The relationship between retirement plan type
and job mobility is more complex than typically considered. While
differences in plan features and benefit structure may directly affect
employees’ mobility decisions (“incentive effect”), the type of plan offered
may also affect the types of employees a given employer attracts (“selection
effect”), thereby affecting mobility through a second, indirect channel. At
the same time, some employees may not be able to accurately assess
differences between plan types due to limited financial literacy. These
factors have implications for policymakers and employers considering
retirement plan offerings.
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Key labor market institutions, and the policies
that shape them, affect the restructuring that leads to economic growth
Economic growth requires factor reallocation
across firms and continuous replacement of technologies. Labor market
institutions influence economic dynamism by their impact on the supply of a
key factor, skilled workers to new and expanding firms, and the shedding of
workers from declining and failing firms. Growth-favoring labor market
institutions include portable pension plans and other job tenure rights,
health insurance untied to the current employer, individualized
wage-setting, and public income insurance systems that encourage mobility
and risk-taking in the labor market.
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